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2019.01.13 Penn Wealth Report Vol 7 Issue 01

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4 penn wealth Report volume 7 issue 01 13 Jan 2019
Penn Wealth Report
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From the Editor/
Nothing personal to Jerome Powell, but we have seen
enough of the Fed chief for awhile. Actually, it is not his fault
as much as it is the emotionally-driven financial news networks.
Within the past month, we have been forced to watch live
speeches and question-and-answer sessions by a guy who is
supposed to be quietly and methodically massaging monetary
policy behind the scenes. e Fed's job is to help prevent run-
away inflation and keep the right amount of grease on the skids
of our financial institutions, not serve as a motivational speaker
for investors. But the networks couldn't help themselves—they
had to carry the most mundane events live, with the market's
instant reaction on the chyron. I found myself saying, "C'mon
Jay, just don't give them any crumbs to misconstrue and force
another 700-point drop.
It really has been utter nonsense. We need to be paying
attention to earnings reports and the health of the domestic
and global economies, not the rate at which the Fed is going
to reduce its balance sheet each month. e 10-year Treasury is
sitting at 2.704% for Pete's sake, not 8%. Nothing the Fed can
do with rates this low should rattle the stock market. Yet here
we are.
As for our outlook on 2019, we have actually become more
bullish thanks to the great pressure relief of the last quar-
ter of 2018. We certainly haven't heard about an "overheated"
market recently. PE ratios have fallen to reasonable levels, and
the Chinese need to make a deal on trade. Our biggest concern
going into the year revolved around the ugly political battles
which will fill the headlines on too many days, and that remains
the case.
It used to be safe to say that one in every four years would
bring us negative returns on the Dow, the S&P 500, and the
NASDAQ. While old paradigms are often meaningless, we just
had that negative year. On our Market Pulse page, we predicted
an S&P 500 in the 2,800-2,900 range by year-end, and we are
sticking by that call. at would represent a 12-15% return
for 2019.
But it won't be smooth sailing on our twelve-month jour-
ney, and investor confidence won't be where it was in 2017.
Furthermore, some of the biggest losers of recent years will take
the year by storm. For example, we have moved from under-
weight to overweight on areas such as emerging markets and
gold. And, with the Fed about done with its quantitative tight-
ening (QT), it will be safe to get back into some bond funds we
have been avoiding.
In short, we expect it to be a good year for hands-on investors.
In other words, shun the plain vanilla index funds and make
specific bets on some former dogs—that bold action should pay
off nicely.
MSH
Michael S. Hazell
editor-in-chief
Just when everyone was ready to call the bear, the markets roar back
2019 is going to be a fun year. It will take skilled investment action, based on an accurate reading of
the past and a pretty good sense of what will unfold domestically, to notch some nice portfolio gains.